Oil Futures Surge Early Monday

Washington, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Brent on the Intercontinental Exchange touched new 2019 highs Monday morning, as geopolitical tensions in Libya and Venezuela elevate the risk of supply disruptions, while strong U.S. job data eased fears of a slowdown in global demand.

In midmorning trading, West Texas Intermediate May contract spiked $1.20 to $64.28 barrels (bbl), while ICE Brent June futures gained $0.50 up to $70.84. Nymex ULSD May contract advanced 1.27 cents to $2.0551 gallon, while RBOB May futures moved 1.09 cents to $1.9796 gallon, reaching a $1.99 better-than five-month high on the spot continuous chart.

Monday's morning rally was spurred by renewed fighting in war-torn Libya, as rebel forces allied with the Eastern government wage an assault on Tripoli for the fourth day. United States announced on Sunday it pulled out a small contingent of American troops from the country due to escalating security risk on the ground. Libya, member of Organization of the Petroleum Exporting Countries, has Africa's largest oil reserves and currently produces near 1.1 million barrels per day (bpd), according to the latest Bloomberg survey.

Oil facilities have been the key target in the eight-year conflict between Libyan National Army headed by warlord Khalifa Haftar and U.N. backed government in Tripoli. Haftar's forces now control most of Libya's territory, including the country's largest oilfields, El Sharara and El Feel with combined capacity of 388,000 bpd. There is the potential that oil exports will plunge from the North African nation if countries refuse to acknowledge oil sales from the Eastern government. In June, Libya's oil exports dropped 800,000 bpd after Haftar's forces captured Zawiaya port, the main export terminal for Libya's oilfields.

According to Bloomberg, Zawiaya terminal is scheduled to load nearly 6 million bbl of crude in April.

On Friday, the U.S. Treasury slapped additional sanctions on Venezuela's oil sector, targeting two companies and 34 vessels owned or operated by Venezuela state-run oil company PDVSA. The United States also identified a vessel that delivered sanctioned oil to Cuba in February and March, in an effort to cut oil supply to the Communist regime of Raul Castro.

Oil futures were lifted last week by stronger-than-expected rise in March nonfarm payrolls, which helped to ease underlying worries of slowing U.S. economy. The report triggered a rally by oil futures to five-month highs, with West Texas Intermediate and Brent futures settling above their 200-day moving averages, a buy signal.

Data from Baker Hughes showed on Friday that the number of U.S. oil rigs jumped by 15 last week to an 831 three-week high, which follows six consecutive weeks in which operating rigs declined. Despite an uptick in U.S. rig count last week, a total of 69 rigs were taken out of service in the first quarter, driving U.S. oil rig count to a nearly one-year low. Saudi Energy Minister sees the rise in U.S. rig count as a sign of improving market conditions, not a bearish indicator. Al-Falih said on Monday the oil market is on its way to rebalance in the second quarter, as global oil inventories are set to decline to reach a "normal level."

Liubov Georges can be reached at liubov.georges@dtn.com